What's the difference between gross and net profit?

Gross profit is revenue minus product costs

If you sell something for $100 and it costs you $30 in materials and direct labor to produce, your gross profit is $70. This tells you whether your pricing makes sense relative to production costs. Most healthy businesses aim for 50-70% gross profit, depending on the industry.

Net profit is gross profit minus all other expenses

Subtract rent, utilities, insurance, marketing, admin salaries, and taxes from gross profit to get net profit. This is your actual bottom-line earnings. You could have great gross profit but negative net profit if overhead is too high.

Both numbers matter

If gross profit is weak, your pricing or costs need fixing. If net profit is weak but gross profit is strong, you have an overhead problem. Tracking both shows you where to focus improvement efforts.